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From Student-Athletes to Employee-Athletes: Why a 'Pay for Play' Model of College Sports Would Not Necessarily Make Educational Scholarships Taxable

33 Pages Posted: 24 Feb 2017 Last revised: 29 Sep 2017

Marc Edelman

City University of New York - Baruch College, Zicklin School of Business; Fordham University School of Law

Date Written: February 22, 2017

Abstract

In recent years, numerous commentators have called for the National Collegiate Athletic Association (“NCAA”) to relax its rules prohibiting athlete pay. This movement to allow athletes to share in the revenues of college sports arises from the belief that college athletes sacrifice too much time, personal autonomy, and physical health to justify their lack of pay. It further criticizes the NCAA’s “no pay” rules for keeping the revenues derived from college sports “in the hands of a select few administrators, athletic directors, and coaches.”

Nevertheless, opponents of “pay for play” cite to numerous problems that they believe will emerge from lifting the NCAA’s “no pay” rules. Among these problems, they argue that granting college athletes the legal status of “employees” would convert the athletes’ tax-exempt scholarships into taxable income – a result that may offset any economic benefits of “pay for play.” Their argument, however, is not necessarily accurate.

This article explains why a “pay for play” model of college sports would not necessarily require college athletes to pay taxes on their educational scholarships. Part I of this article discusses the economic and legal landscape of big-time college sports, and introduces the fallacious legal argument that “pay for play” would saddle college athletes with substantial tax liability related to their educational scholarships. Part II provides a brief primer on the U.S. tax code – exploring sections of the code that may allow for paid college athletes to enjoy a tax-free education. Finally, Part III explores how, with proper tax planning, colleges may provide their athletes with bona fide employment contracts that do not likely risk the tax-exempt status of athletes’ college scholarships.

Keywords: sports law, sports, law, NCAA, tax, tax law, amateurism, college athletes, student-athletes, education, education law, tax scholarships, labor law, antitrust law, athlete rights, qualified scholarship exemption, O'Bannon, sports business, college sports, federal tax

JEL Classification: I83, Z2, Z22, Z20, Z28, H2, K3, J8, J78, J88, K21, K23, K31, K34, N3, P46, I00, I23

Suggested Citation

Edelman, Marc, From Student-Athletes to Employee-Athletes: Why a 'Pay for Play' Model of College Sports Would Not Necessarily Make Educational Scholarships Taxable (February 22, 2017). Boston College Law Review, Vol. 58, 2017. Available at SSRN: https://ssrn.com/abstract=2922133

Marc Edelman (Contact Author)

City University of New York - Baruch College, Zicklin School of Business ( email )

One Bernard Baruch Way
Box B9-220
New York, NY 10010
United States

Fordham University School of Law ( email )

140 West 62nd Street
New York, NY 10023
United States

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